Where future planning meets indexed whole life insurance (Roth IRA alternative)
|There are many ways to build up assets you can use in the future. One of the more common is a Roth IRA plan. It’s attractive for a variety of reasons, but for most people it comes down to the tax benefits. Assets inside a Roth IRA generally grow tax-free if the Roth has been established for at least five years and the money is taken out after you reach the age of 591/2.1 What’s not to like? There’s another option that provides similar tax advantages and a few other benefits as well.1 It’s one you likely haven’t thought of and may not even have heard of: indexed whole life insurance (IWL). An IWL policy can grow assets on a tax-deferred basis.2 But it also provides a few benefits you may not have considered.|
ProtectionLife insurance provides a tax-free death benefit many times the size of the annual premium. It’s a difficult thing to consider, but not everyone gets to see the future they planned. Life insurance can’t replace you, but it can provide the funding to ensure that your plans come to fruition and deliver the benefits to your loved ones just as you would have done. You can even purchase an optional waiver of premium rider to protect this plan from a possible disability occurring to you, thereby providing additional protection.
Controlled volatilityWhen you own an IWL policy your premiums ultimately wind up in accounts linked to market indices. These accounts come with a floor of 0% asset performance which protects you from steep market downturns.3 In order to provide this floor there is also a cap to the amount that can be earned inside the account. Oftentimes this can be thought of as downside protection with upside potential.
Eligibility and contributionsWhile many people are eligible to fund Roth IRAs, there are limits based upon income. There are also limits based on how much that can be contributed annually. A life insurance policy can be purchased, provided you’re healthy, irrespective of how much you earn. And the only limiting factor on your premium size is the amount of death benefit purchased. Please note, that unlike a Roth IRA, your life insurance policy is a long-term commitment with premium requirements for ten years.
Distributions2IWL policies provide you with a variety of ways to access the money inside the policy. Working with your financial professional you can determine which one makes the most sense for you. You may even have the option to change the mode of distribution depending on your risk tolerances or the economic environment. What you get is flexibility in how you access your asset, and that’s a good thing.
When planning your future you should weigh multiple options for how you save money. A Roth IRA can be a fine asset to own, but an IWL may suit your needs more. Or perhaps owning both can make sense for you. Discuss this with your financial professional.
1 Ohio National and its affiliates do not provide tax or financial planning advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for tax or financial planning advice. You should consult your own tax or financial planning advisor before engaging in any insurance transaction.
2 Life insurance cash values grow without being subject to current taxation. Cash values can be accessed by way of policy loans without being subject to taxation. However, if tax-free loans are taken and the policy lapses, a taxable event may occur. Loans and withdrawals from life insurance policies classified as modified endowment contracts may be subject to tax at the time the loan or withdrawal is taken and, if taken prior to age 59½, a 10% federal tax penalty may apply. Withdrawals and loans reduce the death benefit and cash surrender value. Always consult with a tax adviser regarding your particular situation.
3 The deduction of any applicable policy fees may result in a loss of account value when market performance is poor.
Roth IRA contribution and eligibility requirements as of 1/1/2022.
The purchase of an indexed whole life insurance policy is a long-term commitment and is subject to underwriting approval. Life insurance policies contain exclusions, limitations, reduction of benefits and terms under which the policy may be continued in force or discontinued. For complete details of coverage, contact the company for additional information. Before purchasing any indexed whole life insurance policy, you should request a policy illustration and carefully compare both the guaranteed and non-guaranteed elements.
Indexed whole life policies are issued as Policy Forms ICC22-IWL-1/U and any state variations.
Indexed whole life insurance is issued by Ohio National Life Assurance Corporation. Product, product features and rider availability vary by state. Product not available in CA. Issuer not licensed to conduct business in NY.
THIS MATERIAL IS FOR USE WITH THE GENERAL PUBLIC AND IS NOT INTENDED TO PROVIDE INVESTMENT, INSURANCE OR TAX ADVICE FOR ANY INDIVIDUAL.